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About Steve Strauss

Senior small business columnist at USA TODAY and author of 15 books, including The Small Business Bible, Steve is your host here at TheSelfEmployed.com.

About Steve Strauss

Steve Strauss - USA TODAY Columnist

Steven D. Strauss is the country’s leading small business expert. An internationally recognized lawyer, columnist, and speaker, Steve is also an author of 15 books. Steve’s highly syndicated business column, Ask an Expert, appears weekly at USATODAY.com He is also the small business columnist for Microsoft, and AT&T who calls him “America’s Small Business Expert.”

A highly sought after commentator and media guest, Steve has been featured on CNN, CNBC, Bloomberg Television, The O’Reilly Factor, and the BBC. He has been a regular guest on MSNBC’s small business show, Your Business. Steve has been seen in many magazines and newspapers, including Time, Inc., Entrepreneur, New York, The Los Angeles Times, The Chicago Tribune, The New York Daily News, and scores of others.

Steve regularly speaks to groups the world over regarding business matters, including a recent visit to the United Nations. He has also recently acted as the small business spokesperson for Bank of America, Humana Insurance, and Capitol One, among others. Steve has given speeches for many companies and organizations, including HP, Staples, the United States embassies in Jordan, Korea, Japan, and Mongolia, the United States State Department, the Small Business Administration, and Bausch & Lomb.

Finally, Steve is the president of The Strauss Group, Inc: Strauss Law Firm, Strauss Seminar Co., and Strauss Syndication. He graduated from UCLA, the Claremont Graduate School, the Coro Foundation, and the McGeorge School of Law. If you would like to get in touch with him, or have him speak to your group, please contact him here.

About Steve Strauss

Senior small business columnist at USA TODAY and author of 15 books, including The Small Business Bible, Steve is your host here at TheSelfEmployed.com.

The Pros & Cons of Using Credit Cards to Fund Your Business

By: Steve Strauss(Published on 11.13.2012)

Did you know that two most common business funding methods entrepreneurs use when starting their ventures are friends and family and credit cards? When you think about it, it’s not difficult to see why – friends and family members usually offer very easy terms, and credit cards are readily available.

While family and friends may be an easy option for some, credit cards offer a more independent way to fund your new business without putting others at risk. You don’t have to prove your idea to anyone or get them to agree your idea is the best thing sliced bread. You also don’t need to give away equity or face rejection from people who don’t get your idea. With these factors in mind, it’s not surprising to see that funding through credit cards is such a popular choice.

The caveat, however, is that while popular, many people don’t understand how to use credit cards wisely. The biggest problem you may encounter with using credit cards as funding is when you go the personal credit route. Since startups typically have no business credit, the entrepreneur is forced to use his or her own credit to fund the business.

In addition, there are a few other issues to be know about:

The first is the problem that can come from co-mingling personal and business finances. If things go south, co-mingling endangers your personal assets and personal credit. In addition, if you are ever audited, co-mingling is not something the IRS likes to see. Similarly, if you are ever sued, co-mingling is evidence that your corporation is but a shell and should possibly be voided. This is called “piercing the corporate veil.” We do not like when our corporate veil is pierced. And finally, keeping your business finances separate from your personal finances allows you to build your business credit profile.

But the most significant downside when using your own credit cards to fund your business, and the biggest risk, is that you will be personally liable for business debts. Given that one of the main, and very basic reasons to incorporate is to protect your personal assets from business liabilities, putting your own credit and assets at risk by using your personal credit cards to fund your business is not highly recommended.

All that is well and good you say, but what if you can’t get business credit? That is a short-term problem that is fairly easily rectified. Here are the basic steps:

The first thing to do is to incorporate so that the business is a legal entity separate and apart from yourself.

Next, get a federal tax ID number from the IRS, also called an EIN (for Employer Identification Number.)

Next, open up a checking account using the business name and tax ID number. Open up a small savings account as well (less than $1,000 will work fine.)

Use the business name and EIN number to establish basic services – telephone, Internet, FedEx accounts, that sort of thing.

Then, look to get a small loan from your bank – in the name of the business – secured by that business savings account. The collateral of the bank account makes approval much more likely.

Make sure the bank reports the loan repayment history to the credit reporting agencies, as well as Dun & Bradstreet.

After a year or so of this, start to apply for credit cards in the name of the business. Be sure to apply for cards that do not tie your business credit in with your personal credit, or where you personally guarantee the business credit.

If you follow this simple strategy, in a year or so, you will have a solid business credit profile and will not need to ever comingle your business and personal finances again.

About Steve Strauss

Senior small business columnist at USA TODAY and author of 15 books, including The Small Business Bible, Steve is your host here at TheSelfEmployed.com.

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